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What's Residual IncomeAt its simplest level, residual income is the income earned after each of the bills and expenses are paid.For the average employee, this could be their disposable income. Theyve gotten their own paycheck. Then paid the monthly expenses and have some money leftover to get what they want.In the corporate world, the definition is somewhat different.
You can call this passive residual income.Residual Income FormulaFor corporate America, the formula looks like this:Residual Income net operating income (expense of operating assets * cost of funds )For personal finance, the formula looks like this:Residual Income Net Income ExpensesSay you earn a check for $3,000. Taxes require a $500 chunk out of it youre left with a net income of $2,500. That month, youve also got a mortgage payment for $1,000.
Our time is worth something and we shouldnt discount it.For a normal 9 to 5 job, thats what were paid for. Were trading time for money.In the corporate finance formula, our time would be a portion of the charge to function asset.Corporate America considers time as a portion of their invoices paid before theyre paid.Combining the two, we get a formula for passive residual income which would look like this:Residual Income Net Income (Time Working + Expenses)By getting time working down to zero and also the expenses as low as possible, were left :Residual Income Net Incomeand the money is coming in without lifting a finger.The Residual Income ModelThe eventual residual income model means youve got to create something of valueup front, people will continue to pay for.Writers do so with books.
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They record a song and then are able to sell it the rest of their lives to make residual income.Their time working following the initial investment has gone to zero.The ultimate passive residual income model moves away from trading our time for money. It places an emphasis on creating value for others.Residual Income ExamplesName any musician or writer and there is someone who is earning residual passive income.
The Virgin brand has grown to airlines, cell phones, listing labeland on and on.Mr. Branson doesnt really spend his day daily hours working on each of those businesses, but he still earns income from them. If the companies do well, he does well.Warren Buffett is another shining example. Hes made Berkshire Hathaway that brings in income such as Richard Branson, but Buffett also earns passive residual income from all of his investments.By sticking mostly to dividend paying stocks, Mr.
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He purchases a share of a stock that pays dividends, and every month or quarter, he receives paid.The more stocks you purchase, the bigger that residual income becomes. On the point where Warren Buffett earns about $62 million dollars a year on dividend payments. Thats a massive income snowball.Now those are just two owners of enormous companies, but what about the little guysSteve Scott is a choice passive residual income example.Steve has assembled an ebook empire that brings in 5-figures a month from ebook sales.Hes capable to write them quickly on topics that people are looking for.
No manufacturing that needs to take place.Design some applications, write an ebook, or create a product that people are looking for. Then give people the capacity to download it while you get paid to sleep.This way, the item only needs to be built once. After the initial cycle, we remove the create painting find out this here and are going back and forth between sell painting and earn money.In the illustration of an ebook, the initial cycle could look like this:However after the initial cycle, then write ebook is removed.
With every dollar spent, you earn a point which can build to a level at which you can buy goods, or even take a trip.This isnt see this perfect for building an income snowball, but that really is the greatest lead to residual income so weve must pay our bases.Speaking of illustrations, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve covered this one a bit already.If youve got some knowledge that you find yourself teaching friends and family about, it's time to compose an ebook.Whatever youre teaching is currently in demand, which means that there are different folks out there who want to know too.Sit down and write an ebook.